Corporate Haircuts, Creditor Rights and Value Maximisation: A Corporate Law Perspective on Insolvency Resolution in India

Vidhya Vijayakumar T; Jeyalakshmi S

Corporate Haircuts, Creditor Rights and Value Maximisation: A Corporate Law Perspective on Insolvency Resolution in India

Author(s)	Ms. Vidhya Vijayakumar T, Dr. Jeyalakshmi S
Country	India
Abstract	The Insolvency and Bankruptcy Code, 2016 (IBC) was introduced with the objective of consolidating India’s fragmented insolvency framework and establishing a time-bound mechanism for resolving financial distress. At the centre of this framework lies the objective of value maximisation, which seeks to preserve the value of distressed enterprises while ensuring an effective distribution of proceeds among creditors and other stakeholders. One of the most debated consequences of the corporate insolvency resolution process (CIRP) is the substantial “haircut” accepted by creditors on their admitted claims. Although a haircut is not, by itself, evidence of failure, increasingly high haircuts raise important questions concerning creditor rights, valuation practices, commercial wisdom, corporate governance and the effectiveness of the insolvency framework. This article examines corporate haircuts from a corporate law perspective, focusing on the relationship between creditor decision-making and the statutory objective of value maximisation. It analyses the role of the Committee of Creditors (CoC), the scope of its commercial wisdom, judicial approaches to resolution plans, and the consequences of prolonged insolvency proceedings on enterprise value and creditor recovery. The article also considers the unequal position of financial and operational creditors and the need to maintain a balance between creditor autonomy and institutional accountability. Recent data concerning recovery rates, resolution timelines and liquidation outcomes demonstrate that delays and deterioration of distressed assets continue to affect the effectiveness of the IBC. The article argues that the legitimacy of a haircut should be assessed not merely by its percentage but by the circumstances in which it occurs, the quality of valuation, the competitiveness of the resolution process, and whether the resolution plan genuinely promotes value preservation and maximisation. It concludes by proposing greater transparency, stronger valuation safeguards, institutional capacity building and limited but effective judicial oversight without undermining the commercial discretion of creditors.
Keywords	Insolvency and Bankruptcy Code, Corporate Haircuts, Creditor Rights, Value Maximisation, Committee of Creditors, Corporate Governance, CIRP.
Field	Business Administration
Published In	Volume 8, Issue 4, July-August 2026
Published On	2026-08-18

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Corporate Haircuts, Creditor Rights and Value Maximisation: A Corporate Law Perspective on Insolvency Resolution in India

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